The Deal Enron Didn't Get

BEHIND THE NEWS

The Energy Giant's Plan Looked Great: Invest In Experimental Technology, Get The Connecticut Resources Recovery Authority To Buy It, And Have Someone Else Pay The Bill. The Price Of Progress? A Money Grab? Maybe It Was Business As Usual When Electricity And Government Mix.

February 03, 2002|By Joel Lang

On the afternoon of January 23, the day Kenneth Lay resigned in disgrace as chairman of the Enron Corp. and two days before one of his former top executives was found in his car outside Houston dead from an apparently self-inflicted gunshot, Daniel Sosland, an environmental lawyer who dared to take on Enron at the height of its power, unlocked the door to his new office at 28 Grand St. in Hartford.

Stepping inside, Sosland apologized for the looks of the place. Closet-sized, on the poor fringe of the city's courthouse district, it had no view to speak of, nor furniture for that matter. New chairs and desks were still in boxes, awaiting do-it-yourself assembly. Hastily moved legal files from Environment Northeast, the nonprofit ``green'' research and advocacy group Sosland founded and directs, spilled from sagging cardboard boxes, or were dumped in stacks on the floor.

Sifting through one of those loose stacks, Sosland began tossing aside hundreds of pages of transcripts and documents from hearings into a deal Enron wanted to do last year with the Connecticut Resources Recovery Authority (CRRA), the quasi-public enterprise based in Hartford's South Meadows that collects trash from 68 area towns and burns it to produce electricity.

This deal was not, however, the big Enron-tainted deal in Connecticut. That one, first proposed late in 2000, eventually led the CRRA to pay $220 million up front to Enron when Enron replaced Connecticut Light & Power as the primary buyer of CRRA's electricity. CRRA may never recover that money, and Connecticut taxpayers may have to cover the loss.

The Enron/CRRA deal described in the papers strewn on Sosland's floor was more modest. Only $124 million was at risk, and it involved a third party -- Danbury-based FuelCell Energy Inc. Enron would have managed a demonstration test of the company's gas-burning fuel cells on CRRA property. What's more, CRRA and Enron wanted the state Department of Public Utility Control to unlock a state energy conservation fund to bankroll the fuel cell project.

Both deals were offshoots of energy deregulation, a new era in which Enron, once a simple gas pipeline company, found ways to make and then lose billions. Deregulation required CL&P to get out of the business of generating electricity, including its contract with CRRA. Deregulation also created the conservation fund, which is fed by a small surcharge to monthly electric bills.

Sosland, who is 43, was not alone in fighting their plan, but he had a special interest in preventing what some called a raid on the fund. He helped devise it, and Environment Northeast holds a seat on the management board that oversees the fund. Sosland said that Enron and CRRA deliberately bypassed the board and avoided hard questions until they came before the DPUC. He still wonders whether Enron went unchallenged ``because Enron's Enron,'' in other words, because its reputation was so great, or because of its political influence. ``Were they immunized from being asked hard questions?'' Sosland said.

His questions could be asked of either deal. The staggering irony, in hindsight, is that both deals took shape during the period of time that it is now known Enron began to overreach itself and tip toward bankruptcy. The intricacies of the disastrous electricity deal between Enron and CRRA are still not fully understood -- the $220 million payment was financed through the sale of bonds and ultimately Enron was to have returned more than $220 million to CRRA -- but the deal they tried to do with fuel cells became an open book.

The transcripts Sosland tossed on his office floor were of public hearings the DPUC held on the fuel cell deal in May, June and July of 2001. It was in May that J. Clifford Baxter, the Enron vice chairman who recently was found dead, an apparent suicide, abruptly resigned, saying he wanted to spend more time with his family.

Also in May, TheStreet.com, an on-line financial news service, reported that a respected stock analyst had issued a private advisory to his clients that Enron's stock was drastically overvalued and that its financial statements were ``confusing and opaque.'' Sosland said the analyst called him even before the hearings began to warn him of his findings.

``It was astounding the calls I was getting,'' said Sosland. The DPUC was getting calls, too. Investment brokers wanted to gauge the chance of the fuel cell deal being approved. If it were, it would be a big boost for the mostly experimental fuel cell industry and especially for Enron's partner, FuelCell Inc.

One of the documents Sosland dug from his files was FuelCell's annual report, filed early last year with the Securities and Exchange Commission. The report described its fuel cells as commercially untested and said that in June of 2000 it had gotten approval for a $4 million loan from the Connecticut Development Authority, which provides business seed money. The company was building a fuel cell factory in Torrington.